Two days of amnesty left for tax evaders

two-days-of-amnesty-left-for-tax-evadersIf you've secretly been holding money offshore and haven't reported it on your taxes, you must do so by Thursday, Oct. 15. That's when the IRS ends its current tax amnesty program, so if you wait any longer, you could face huge fines and jail time. Furthermore, UBS (UBS), Switzerland's largest bank, is about to release another 4,450 names of account holders suspected of tax evasion to the U.S. government, and once the IRS has your name, it will be too late to make a deal.

No date has been announced publicly for the transfer of names, but it is expected to happen soon.

But tax evaders who don't bank with UBS shouldn't assume they're safe. Investigations initiated based on information acquired from earlier amnesty claims have identified other banks and financial advisers being used by U.S. citizens to hide money in offshore accounts, and those investigations could lead the IRS to non-UBS clients.
While one might think most of the people holding assets overseas would be international traders who have used Swiss banks to hide their profits, others who are seeking legal advice about their offshore accounts include Holocaust survivors, people in the entertainment industry and immigrants who left money in their home countries. In addition, many people did not realize that if they inherited money outside the U.S. and left it outside the U.S., they still needed to report it in the U.S., attorneys told Bloomberg.

Some clients are more afraid of family members finding out about their hidden money than the IRS. I wonder how many divorcees will be trying to find out whether their exes are filing for amnesty?

As part of the amnesty program, as long as your name has has not already been given to the IRS by UBS or some other source, your filing will not become public. You can privately pay any taxes, interest and penalties due, and all will stay secret. But if the IRS gets your name during its investigations, all bets are off. You no longer qualify for amnesty, and you could face federal prosecution and much larger tax penalties.

Those who take the amnesty could pay as much as 20 percent of their account's assets, based on its peak value during the past six years. For inactive accounts, tax evaders may pay as little as 5 percent. But if the IRS comes knocking at your door rather than the other way around, the law allows them to take up to 50 percent of the value of the account for each year you did not file a Report of Foreign Bank or Financial Accounts (FBAR). Anyone holding more than $10,000 overseas must file an FBAR annually with their U.S. tax return. If you didn't file for a few years, and don't come forward voluntarily during the amnesty period, you could easily lose everything you have overseas.

So far in 2009, the amnesty program has enticed 3,000 taxpayers to voluntarily admit they were hiding funds offshore. That's a huge crowd compared to the 90 who filed for amnesty in 2008. The primary reason people are coming forward is likely the IRS prosecutions so far in 2009: two UBS (UBS) bankers, five American clients of UBS, a Liechtensteiner adviser, a Swiss lawyer and a manager at Zurich-based Neue Zuercher Bank are facing prosecution. UBS paid the U.S. government $780 million in fines, penalties, interest and restitution in February, and turned over about 250 names to get the ball rolling.

In September, the IRS decided to shift the audits of wealthy Americans suspected of offshore tax evasion to the elite division that examines businesses. The IRS posted internal job listings seeking auditors to work for a newly created office within its Large and Mid-Size Business division that will monitor what the IRS called the "global high-wealth industry."

If you are uncertain about what to do, time is running out to seek legal advice. Even if you decide not to file, you'd be wise to sit down with a tax attorney and determine your best course of action. I doubt the IRS is going to play nice, and all indications are that it intends to beef up its policing of offshore accounts.

Lita Epstein has written more than 25 books, including The Complete Idiot's Guide to Tax Breaks and Deductions.
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